The Future of Ecommerce Fulfillment: How to Avoid Platform Lock-in

Manish Chowdhary

August 25, 2022

Why did Amazon go from a severe lack of warehouse space to overstaffed and looking to sublease their warehouses in a span of just four months? Major changes are happening in the fulfillment landscape among the biggest ecommerce players, and they have big implications for sellers.

Marketplaces Accelerate Fulfillment Strategies

In Amazon’s April ‘22 earnings call, CFO Brian Olsavsky’s admission about warehouse capacity, “We quickly transitioned from being understaffed to being overstaffed”, caught many by surprise. The statement went along with another announcement that flew under the radar in the press, but is much more important for the future of ecommerce. On April 21st, Amazon launched a new service: Buy with Prime, which will enable direct-to-consumer (DTC) merchants to offer Prime checkout & shipping on their websites.

Shopify saw the shot across its bow, and it didn’t take them long to respond in a big way. In May, they announced their own big move: they’re acquiring Deliverr, a 3PL network, and plan to launch Shop Promise, a new service that will offer Shopify merchants one- and two-day delivery options.

Not to be outdone, Walmart is pushing hard to grow their own ecommerce delivery network, Walmart Fulfillment Services. In June, they announced that they’re building four “next generation fulfillment centers” to modernize their ecommerce supply chain. They explain, “Today we use our 31 dedicated ecommerce fulfillment centers and 4,700 stores located within 10 miles of 90% of the U.S. population to fulfill online orders at exceptional speed. But we’re not stopping there.”

Why are the three titans of ecommerce all hitting the accelerator on fulfillment? What does it mean for you?

It Isn’t Just About Fulfillment: It’s Also About Locking Merchants to Platforms

Amazon Prime is the service that hundreds of millions use to get online delivery in two days or fewer, so Buy with Prime must be about fulfillment, right? Only on the surface.

Here’s how Buy with Prime will work: for a fee, the service will let third-party ecommerce merchants use Amazon’s fulfillment network for orders from their own sites. In addition, Buy with Prime will put the Prime badge on DTC websites next to items eligible for free 2-day and 3-day shipping. Last, the whole checkout experience will be powered by Amazon Pay.

The last part has gone overlooked, but it explains much of where ecommerce is heading.

The key is in the relative profitability of different pieces of ecommerce: online retail, logistics, and fulfillment all have fairly small margins. In contrast, payments are extremely lucrative.

Who is getting that lucrative payments profit on direct-to-consumer websites right now? Shopify, not Amazon. Shopify’s Merchant Solutions revenue, which notably includes revenue from Shop Pay, is growing much more quickly than their Subscription Solutions revenue. In their Q1 ‘22 earnings guidance, Shopify noted that Merchant Solutions grew to make up 71% of their total revenue, dwarfing Subscription Solutions’ 29%. The numbers show it clearly: payments are Shopify’s lifeblood.

Amazon, Walmart, and Shopify are all ecommerce “landlords” that want to charge rent to their “tenants”, ecommerce merchants, everywhere they can. They’re locked in a race to provide ever-more-compelling platforms to merchants not only to capture more of the merchants’ GMV, but especially for all of the extra services that they can bolt on top. Not to mention, the payment processor gets access to first-party data, the lifeblood of modern digital advertising.

Amazon Buy with Prime ratchets up the pressure on Shopify to help its sellers offer fast delivery. If Shopify had done nothing, they risked defection to Buy with Prime, and then they would have lost much of their massive payments revenue. Shopify had no choice - they had to come out with a bold upgrade to their own platform, which they did with the Deliverr acquisition.

Properly understood, the flurry of fulfillment announcements from Amazon, Shopify, and Walmart are more about keeping sellers happy and on their platforms, where their other services rake in the profit.

You Need One-to-Many Solutions

Some see the fulfillment competition between Amazon, Walmart, and Shopify as a good thing – in trying to one-up one another, they’re continually improving the options that merchants have at their fingertips. And it would be a positive development, except for one key issue: they’re tying their ecommerce order fulfillment networks to their own platforms. Here’s the downsides.

Yes, sellers can use Fulfillment by Amazon for their DTC site with Amazon Multi-Channel Fulfillment and Buy with Prime; but MCF is >50% more expensive, and it shares inventory limits with Amazon volume. On top of that, DTC orders come in Amazon branding, and many marketplaces like Walmart don’t allow FBA at all.

Walmart is even less flexible: Walmart Fulfillment Services only fulfills orders sold on Walmart.com.

Meanwhile, Deliverr is quickly pivoting to prioritize Shopify. Shopify introduced Shopify Fulfillment Network (SFN) just three years ago in mid-2019, and it never grew past an invite-only platform available only to Shopify sellers. In fact, earlier this year they looked to be giving up on SFN when they announced that they were cutting fulfillment locations. Given the relative small size of SFN and Deliverr, we’re not surprised that Deliverr’s recent product release announcements have been mostly tailored for Shopify sellers.

As more sellers expand to additional channels to boost growth, the realization that their current fulfillment strategy can’t support them throws cold water on their growth plans. Having many fulfillment providers adds complexity and failure points, and more importantly it also adds costs in the form of duplicated inventory. Sellers want to consolidate as much as possible to enjoy economies of scale, but Amazon, Walmart, and Shopify are doing everything they can to deny one-to-many solutions.

Faced with this threat to their profitability, sellers must move past convenient, but un-scalable solutions. Amazon wants you on FBA, Walmart wants you on Walmart Fulfillment Services, and Shopify wants you on Shopify Fulfillment Network. You need a flexible one-to-many fulfillment service (like Cahoot!) that powers Amazon-like speed and cost no matter the channel. Don’t let the ecommerce giants force you into their boxes – keep your growth opportunities open and enjoy economies of scale with a channel-agnostic partner.

Contributing Author: Manish Chowdhary, Founder & CEO at Cahoot (World's 1st Peer-to-Peer Fulfillment Network for Brands & Retailers)

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Sept 27, 2022

Global Ecommerce Weekly News: 27th September 2022

Get up to date with this week's ecommerce headlines from around the globe. --- Amazon News --- Amazon drives renewable energy push with 71 new projects Amazon is planning to add 2.7 gigawatts of clean energy capacity through a couple of new projects as the company attempts to use 100% renewable energy by 2025. The ecommerce business will soon have a total of 329 renewable energy projects, generating 50,000 gigawatt hours of clean energy, which is equivalent to powering 4.6 million US homes every year. [Read more on Reuters](https://www.reuters.com/business/sustainable-business/amazon-drives-renewable-energy-push-with-71-new-projects-2022-09-21/) Amazon launches Prime Early Access Sale Amazon is launching a new 2-day shopping event for its Prime members only, beginning on the 11th of October. Across 15 countries, Prime customers will have access to the shopping event, with thousands of deals on offer globall, ranging from fashion to electronics to essentials. The event has the purpose of giving Prime users the chance to spread the cost of items over the winter months, 6 weeks ahead of Black Friday. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/26/prime-early-access-sale/) --- Other Marketplace News --- Shopify unveils new localisation tool Shopify is launching a new localisation tool, called Translate & Adapt, which works with Shopify Markets to offer localisation for sellers who are looking to expand into new markets. The tool translates a user’s online store into different languages, including product pages and information pages. Merchants are also able to create different shipping terms for each market using the new tool, which allows international expansion and offers a more localised consumer experience, unveiling new potential. [Read more on Ecommerce News](https://ecommercenews.eu/shopify-launches-new-localisation-tool/) Etsy is set to invest hundreds of millions into its marketing platform Etsy CEO claims that the company is on route to spend more than $570 million USD on marketing this year. Even during a time of macroeconomic pressure, inflation and rising interest rates, the company is preparing itself and its sellers for the upcoming holiday season and is focused on retaining interest from buyers. [Read more on Yahoo News](https://uk.news.yahoo.com/etsy-600-million-on-marketing-ceo-154054219.html) --- Other Ecommerce News --- Meta looks to cut costs by 10% in the coming months Meta employees are facing job redundancies as the company plans to cut its costs by 10% over the next few months. Meta reported a 22% YoY increase in costs and expenses, totalling over $20 billion USD. The cuts are expected to come in the form of job redundancies as a result of department reorganisations rather than formal layoffs. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/22/meta-to-slash-costs-by-10-over-coming-months/) DHL teams up with Quadient to offer smart locker deliveries in the UK DHL and tech company, Quadient, have partnered to offer smart lockers parcel pick-up throughout the UK. The new contactless, secure locker stations will give recipients more choice and flexibility to receive their parcels at a time and location best suited to them. The partnership plans to install 500 locker stations across the country by the end of 2022. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/21/dhl-partners-with-quadient-to-offer-smart-locker-delivery/) The online fashion market is set to be worth nearly $170 billion USD in 2025 The European online fashion retail market is set to grow 50% by 2025, with an online turnover of $170 billion USD, which is 33% of the retail branch’s total. Cross-border marketplaces prove to be the largest drivers of this growth, with online websites and apps like Vinted largely pushing the market’s online growth. Zalando recently became the largest cross-border fashion retailer/marketplace, responsible for 11.7% of the online market’s share. [Read more on Ecommerce News](https://ecommercenews.eu/online-fashion-market-worth-e175-billion-in-2025/)
Sept 26, 2022

Top 5 Ways to Prepare for Peak with Google Ads

Peak season is almost upon us and with all signs pointing to it starting earlier than ever, with Christmas gifting searches now ramping up in August and September, it’s time to start preparing for peak. In this article, we’re sharing our top five tips for planning and preparing for peak season with Google Ads and the strategies required to get your Paid Search ready so you can drive success over this crucial period.

1. Go Early

In 2021, gifting search terms started increasing in popularity in August. The general trend is that people are looking, researching and weighing their options early, so it’s best to start your Paid activity early to ensure that you’re capturing that early research traffic. This will help drive revenue alongside aiding those consumers who are in their research phase.

From 2020 to 2021, spend during Cyber Week actually only rose 2% but in the weeks leading up to it, it increased by 16%. However, Cyber Week is still the biggest period during the latter half of the year, accounting for 23% of all online spend by consumers over peak. Being prepared and starting early will help you to maximise your time during this period.

2. Get Ready for Privacy Changes

 According to Google, 48% of global consumers have stopped buying or using a service due to privacy concerns. Privacy is front of mind when consumers are shopping online and we know that Google is phasing out 3rd party cookies in 2023. This is going to make it much harder to track users online and it’s something that brands need to think about this now – waiting isn’t an option.

From a Google Ads point of view, you want to ensure you have set up the Google Ads tag across your site and have enabled ‘Enhanced Conversions’, which ensures all conversions are tracked and allows you to monitor other actions such as ‘Add to Cart.’ This is relatively easy to set up, especially if you use ‘Google Tag Manager’.

It’s also vitally important that you build up your first-party data during this time as this is data you own and it can be used when targeting consumers that have provided your brand with their email address. Pattern’s own experience shows that by segmenting and using first-party data, you can see a 10% improvement in revenue and ROI.

3. Ensure Consumers Can Discover your Brand

A full-funnel approach is now more important than ever as consumers become more discerning and have more choices than ever of where to shop.

Pattern has seen success with Google Ads’ ‘Discovery Campaigns’ (image-based ads that appear on Google platforms such as Gmail and the Google app), which have driven success both from a traffic and revenue perspective.

The performance of these campaigns is significantly enhanced by adopting a segmented and nuanced approach to first-party data and incorporating these into your campaigns. Other options for a full-funnel approach include YouTube and testing bidding on keywords that are more representative of the research phase. (e.g. ‘best baby clothes’ for a baby clothes brand)

4. Get Moving with Performance Max

Earlier this year, Google announced that they were moving away from Smart Shopping and launched Performance Max. This is a new campaign type that incorporates features and placements from Smart Shopping but expands them onto other platforms such as Gmail but also alternative creative options, such as images and videos.

Since Google has already started automatically upgrading Smart Shopping campaigns to Performance Max, expect to see some fluctuations in the first 2 weeks following the switch over but results generally seem positive. We recommend upgrading sooner rather than later to limit any potential impact to peak period.

5. Flight Budgets Accordingly

Peak period will be even more competitive than in 2021 and you’ll need your budgets to support this period, we recommend boosting budgets in October to start capturing that early peak traffic. As we enter November and the Cyber Period, start early and make sure you are capturing those consumers looking for early bargains, ensuring you are being nimble in your optimisations and reacting to the data that you are seeing.

Overall, peak period is vital to help drive your sales and by preparing early, you will see strong results and drive success for your brand. If you want to discuss how your brand can navigate this next peak period, contact us to discuss your options with our performance team now.

Sept 20, 2022

4 Ecommerce Marketplace Consultant Must-Haves

Entering the ecommerce landscape is a huge undertaking for any brand—it usually requires a large investment in resources and expertise to really be successful. Any brand can quickly get in over their heads trying to navigate the nuances of SEO, fulfillment and logistics, distribution control, listing optimization, and meeting the numerous other requirements and administrative tasks to show up well on marketplaces. 

Unfortunately, because it’s so easy for third party, gray market, and unauthorized sellers to obtain and sell products online, many brands find themselves pressured to execute an ecommerce plan without the right resources to succeed on marketplaces and their other channels.

So, for brands looking to enter the ecommerce space or improve their current and future performance, it makes sense to partner with an ecommerce consultant.

Pattern’s global presence and proven success with hundreds of brands has allowed us to develop highly effective ecommerce consulting services. We can guide your brand to navigate issues both large and small in marketplaces worldwide. To maximize your ecommerce efforts, you’ll need to understand what an ecommerce consultant does and how to select one who drives the right value for your brand and products. 

What is an Ecommerce Consultant?

An ecommerce consultant is a specialist in the ecommerce space who can give you personalized guidance on how to market your products and grow their presence on digital marketplaces.

An ecommerce consultant should be able to analyze your brand, audience, category, opportunity, and current roadblocks and help you understand how to utilize your resources (or what resources are missing) to be most effective in capturing your opportunities in the ecommerce space.

Not sure how to evaluate a consultant? Here are 4 key attributes to look for as you make your choice.

1. Brand Obsession/Specialization/Passion

At Pattern, we prioritize brand obsession for a reason—we know that a brand-centered mindset makes a crucial difference in the outcomes and results our partners achieve. So in our experience, when you begin your search for an ecommerce consultant, it’s important to look for a partner who is specialized in ecommerce, invested in the product, and passionate about helping brands build and improve their strategies. Typically, this means finding someone that consults exclusively for ecommerce marketplaces, rather than choosing a consultant who offers many different services. 

2. Proven Results

It’s also important to avoid choosing a consulting partner who can’t deliver the right experience for your brand. The best indication of whether your potential consultant can do that is to review their history, data, and results with other brands. Ask if they’ve helped others in your selling category, if they’ve solved specific issues your brand is facing, and why they feel you are a good fit. The key is to leave the conversation feeling confident that you understand your consultants’ capabilities and whether or not they match up with your needs.

3. Wide Range of Marketplace Expertise

It’s best to pick a consultant who knows how to guide a brand onto and through multiple marketplaces worldwide. You’ll want to take a look at your long-term strategy and think about the regions and platforms you’re currently on and where you might want to take your brand in the future. If your consultant is truly great at what they do, they’ll be able to help you perform well enough with your current product roadmap that it’ll be a no-brainer to expand your presence at the right time.

4. Network of Resources

The most effective partnership with an ecommerce consultant will be able to give you both recommendations and point you to solutions for making those changes in your planning, processes, and execution. Your time and money is valuable, so you want to make sure that you’re spending it as efficiently as possible as you follow your consultant’s advice. So, before you commit to an ecommerce consultant, ask about the resources and concrete solutions they typically recommend to the brands they work with.

Achieve Your Ecommerce Goals With Pattern

Finding an ecommerce consultant that checks the boxes can be a difficult task. At Pattern, our entire focus and drive centers around giving brands the tools and resources they need to succeed on domestic and international ecommerce marketplaces. 

With over 100 global ecommerce consultants across 10 global offices, we have the right tools to partner with brands across the world to achieve better ecommerce success. We give specialized advice, then make sure our partners have all the adequate SEO, social media, CRM, Amazon multi-channel fulfillment services, and ecommerce outsourcing services they need.

Interested in ecommerce consulting services? Set up a call here to learn what Pattern can do for your brand on global marketplaces.

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